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Chapter 3 of 30 · Study Guide to Human Action: A Treatise on Economics by Robert P. Murphy

Part Two: Action Within The Framework Of Society

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Part Two—Action Within the Framework of Society

CHAPTER VIII

HUMAN SOCIETY

Chapter Summary

1. HUMAN COOPERATION

Society is the combination of individuals for cooperative effort. People collaborate—form social bonds—because they perceive the greater productivity afforded by the division of labor. This doesn’t mean that people set about to “form” society, but rather that each particular act of cooperation was the outcome of deliberation. The feelings of belonging and camaraderie that characterize society are an offshoot of the material advantages of the division of labor. Without the latter, mere sentiments would not be sufficient to hold society together.

2. A CRITIQUE OF THE HOLISTIC AND METAPHYSICAL VIEW OF SOCIETY

Throughout history many religious and other metaphysical intellectuals argued that society had an existence independent of the individuals composing it. God, Nature, or some other force had His or its own ends for society, and the shortsighted and wicked individuals had to be forced to sacrifice their own selfish interests in order to achieve the greater plan.

The classical economists demonstrated that such theories are unnecessary. Social cooperation serves the interests of everyone; virtually all people prefer the advantages of civilization to the fleeting thrill of murder, theft, and other antisocial behavior.

Although society serves the rightly understood interests of all people, nonetheless some individuals are too narrow-minded or lack the moral will to respect the rules of civilized behavior. Mises believes that the function of a state or government is to check the antisocial behavior of such people.

Because all governments, no matter how despotic, ultimately rest on the tacit consent of the people, classical liberalism supports democracy as the only way to maintain peace. In other words, because the majority are going to get the rulers they want in any event, classical liberalism suggests ballots rather than bullets. This endorsement of democracy is purely to minimize violence, and doesn’t rest on a naïve faith in the wisdom of the common man.

Praxeology and Liberalism

Liberalism is a political doctrine. In praxeology, “happiness” and “satisfaction” are purely formal terms. Yet in liberalism they take on concrete form; it is assumed that all (or most) men prefer wealth to poverty and health to sickness. Liberalism relies on the value-free theorems of praxeology in order to recommend the best routes to achieving these nearly universally held values.

Liberalism and Religion

Liberalism is a rational political doctrine that does not itself refer to God or other supernatural elements. However, it is wrong to view liberalism as “atheistic.” On the contrary, the separation of church and state—a hallmark of liberalism—allows the various sects to preach their views unmolested. Liberalism certainly opposes theocracy, but not religion per se.

3. THE DIVISION OF LABOR

The superiority of the division of labor means that the yield per hour of labor can be increased when workers act in cooperation with each other. This empirical phenomenon is due to (1) the innate inequality of the abilities of workers in various tasks, (2) the unequal distribution of resources on the surface of the earth, and (3) the fact that some tasks are beyond the power of a single worker.

4. THE RICARDIAN LAW OF ASSOCIATION

David Ricardo is credited with the discovery of the law of association, or the law of comparative cost. Although it is obvious that cooperation can make two people better off when each is the superior producer of a particular good, Ricardo took the argument a step further. Even if one person is superior at producing everything, even so he benefits from cooperating with the inferior partner. For example, a master chef benefits from hiring subordinates to chop vegetables and prepare the other ingredients, even if the chef could have performed these tasks better than the employees. This is because “outsourcing” the tasks to the inferior workers frees up the chef’s time and allows him to concentrate on those areas in which his advantage is greatest.

Current Errors Concerning the Law of Association

Ricardo’s demonstration makes some strong assumptions, for example that there are only two countries producing two goods, and that capital and labor are immobile within each country. However, his argument illustrates a central proposition of economics. The fact that even superior individuals can benefit from cooperation with “inferior” peers is the basis of civilization.

5. THE EFFECTS OF THE DIVISION OF LABOR

The innate differences between men and regions of the world both cause and are enhanced by the division of labor. The introduction of mechanical, “labor saving” devices was only possible once the division of labor had transformed complicated projects into a succession of smaller tasks.

6. THE INDIVIDUAL WITHIN SOCIETY

Man emerged as a social being. There was never a time when (what we would call) humans lived in an asocial way. Praxeology deals with the isolated individual but that is only to understand his action.

The Fable of the Mystic Communion

The various theories of social bonds founder if they do not acknowledge the primacy of the division of labor.

7. THE GREAT SOCIETY

Not all interhuman relations are social; war is of course antisocial. However, even here the recognition of the division of labor led to the gradual reduction in severity of hostilities. Conquerors no longer slaughtered their vanquished foes outright, but instead enslaved them. The development of “rules” of civilized warfare carried the process further.

8. THE INSTINCT OF AGGRESSION AND DESTRUCTION

Some writers extol the manly urges to kill and destroy that have allegedly been sapped by “unnatural” modern society. It may very well be that people thirst for bloodshed, but they also hunger for food and pang for fancy houses. Praxeology teaches that people must choose between these satisfactions.

Current Misinterpretations of Modern Natural Science, Especially of Darwinism

Modern liberalism does not rely on the (false) belief that men are created equal. Darwinism does not in any way invalidate the liberal creed; on the contrary, the traits conducive to social cooperation (rather than the allegedly “natural” instincts of aggression) are precisely those that maximize one’s offspring in the current environment. Far from being unnatural, reason is the foremost biological mark of homo sapiens.

Why It Matters

In this chapter, Mises aims to do nothing less than establish the foundation of civilization. Society is the great means through which individuals enhance their own productivity and thus attain a far greater state of satisfaction than would be possible in isolation. However, social bonds can only develop in an environment of peace and respect for property. Because the majority will always achieve what they desire (through force if necessary), the only hope for civilization is to persuade the masses that social cooperation is in their own interest.

Technical Notes

  1. People often ask, “Was Mises an anarchist?” As the discussion on pages 148–49 makes clear, the immediate answer is no. However, a closer reading shows that Mises here uses anarchism to mean a lack of law enforcement. Nowhere does Mises discuss why the state must provide law, police, and military defense. He simply assumes that these are the proper functions of the state, and since they are necessary for society, therefore (Mises argues) the state is necessary.
  2. Mises (pp. 161–62) underscores that the Ricardian law of association doesn’t rely on the (fallacious) classical theory of value. Because of his restrictive assumptions, Ricardo’s analysis could be couched purely in physical terms and he was thus able to provide a useful theorem even without the benefit of the modern subjective theory of value. If one wishes to go beyond the limitations of Ricardo’s demonstration, the only recourse is to analyze in terms of money.

Study Questions

  1. HUMAN COOPERATION
    • What is society?

    Comment: “[S]ociety is nothing but the combination of individuals for cooperative effort.”

    • Can society act?
    • Why did cooperation and society emerge, according to Mises? What role does the division of labor play?
  2. A CRITIQUE OF THE HOLISTIC AND METAPHYSICAL VIEW OF SOCIETY
    • Why and under which conditions does an individual substitute concerted action for isolated action? How is this opposed to the holistic doctrines?
    • Why is society a product of human action?
    • Has society been designed by humans?
    • What is the essential problem of all the variants of collectivist ideas?
    • What is Mises’s perception of anarchism?
    • What is the role of democracy, according to Mises? What does he think about majorities?
    • In what way does his definition of the state differ from that of the socialists?

      Comment: “[Liberalism] has full confidence in man’s reason. It may be that this optimism is unfounded and that the liberals have erred. But then there is no hope left for mankind’s future.”

  3. THE DIVISION OF LABOR
    • Why is the division of labor more productive than isolated subsistence?
  4. THE RICARDIAN LAW OF ASSOCIATION
    • What does the law of association show with regard to the division of labor?
    • Consider the following example (note that Sally is more productive in both lines):

      80_img01.jpg

      If Joe and Sally each give 60 hours to producing p and 60 hours to producing q, what would each get to consume in isolation? Is there a way they could cooperate so that (with the same expenditure of 120 hours each) they each consumed more of both goods than was possible without trade? (Hint: Suppose that Joe specializes entirely in the production of good p.)

    • What is the difference between the law of association and the law of comparative cost?
    • How does the law of association relate to free trade?
    • How does the mobility of factors of production affect Ricardo’s law?
  5. THE EFFECTS OF THE DIVISION OF LABOR
    • Why does the division of labor intensify the innate inequality of men?
  6. THE INDIVIDUAL WITHIN SOCIETY
    • What is the natural state of man?
    • Why is it romantic nonsense to praise the days of primitive barbarism?

    Comment: “The mystical experience of communion or community is not the source of societal relations, but their product.”

  7. THE GREAT SOCIETY
    • Why is peace preferable to war?
    • What does society always imply with regard to human interactions?
  8. THE INSTINCT OF AGGRESSION AND DESTRUCTION
    • What is meant by “social Darwinism”? Is the term still used today?
    • What distinguishes man from other animals?
    • How did utilitarians show that cooperation is beneficial for the “most efficient” and the “less efficient”?
    • Why do utilitarians recommend equality under the civil law?

CHAPTER IX

THE ROLE OF IDEAS

Chapter Summary

1. HUMAN REASON

Reason distinguishes man from other animals. All action is preceded by thinking. The reasoning employed may be faulty, but, by definition, action is the purposeful attempt to remove uneasiness. It is always an individual, not “society,” who thinks. Tradition—primarily through language—allows present actors to incorporate into their own thinking the reasoning of their ancestors. This renders present thinking more productive, just as labor is now more productive because of our inheritance of capital goods created by our forefathers.

2. WORLDVIEW AND IDEOLOGY

A worldview serves as both an interpretation of all things, but also as a guide to action. In this sense a worldview is both an explanation and a technology. Ideology is a narrower term, in that it restricts attention to human interaction over earthly concerns. Religious dogma and even the pure natural sciences thus fall outside the scope of ideology.

Even though the various ideologies are, on the surface, quite incompatible, they all champion the same things for their followers. Every party promises to deliver economic prosperity, (eventual) peace, a reduction in disease, and so forth. Thus their disagreements are not over abstract principles on which compromise is impossible. In contrast to truly religious wars, when it comes to secular (i.e., ideological) conflict there is hope for cooperation, because human society is the great means by which all people can better achieve their differing objectives.

The Fight Against Error

A popular view holds that an ideology is most successful when it contains contradictory tenets, because after all “life isn’t logical.” This is completely false. Reason is man’s primary tool in the struggle against nature, and it does no good to let action be guided by contradictory beliefs. In this case the action will be in vain, and worse the contradictory belief system may make it difficult to understand why.

The tendency to denounce adherents to rival ideologies as evil or insane is deplorable. Ironically, the allegedly “paranoid” monetary cranks and even Nazi theorists were simply more consistent in applying the principles of commonly held views regarding the benefits of government intervention in the economy.

3. MIGHT

Human action creates society, and human action is guided by ideology. In this sense, society is a product of ideology. The Marxists therefore have things exactly backwards, since they assert that the material forces of the social order condition the ideology of the day.

Might is the power to direct the actions of others. Rule is the exercise of might in the political arena. Even though a ruler relies on violence to punish dissenters, it is ultimately ideology rather than guns that keeps a particular person or party in power. Without a group who voluntarily obey his orders, the tyrant would be a lone individual who at most could harm a few dozen people. In this loose sense, all governments rest on popular opinion.

Traditionalism as an Ideology

Traditionalism is an ideology that considers good and expedient the value judgments, customs, and procedures handed down from ancestors. Often the “traditional” doctrines are not really the ones held by ancestors.

4. MELIORISM AND THE IDEA OF PROGRESS

The notions of progress and retrogression only make sense in the context of an actor’s plan. Evolution in the biological sense is purposeless and hence it is impermissible to view creatures as gradually improving over time and turning into “higher” forms of life.

The fatal flaw of 18th- and 19th-century rationalists and (classical) liberals was their faith in the decency and wisdom of the common man. These reformers attributed the barbarism of human history to the political power of the aristocrats and kings. Since democracy allowed the direct rule of the many, these enlightened thinkers considered social progress inevitable. What they failed to predict was that the masses were quite fallible and could fall sway to horrible ideologies.

Why It Matters

In previous chapters, Mises made the case for reason, a single system of logic for the human mind, and so forth. In the present chapter, Mises argues that ideas control human destiny. Thus, not only is it sensible to discuss ideas and their relative merits; it is vital to do so because civilization depends on them.

Technical Notes

  1. The Marxists believe that ideologies (except Marxism of course) are simply adapted to justify the economic and social order of a given period. For example, once the material conditions of production rendered feudalism unsustainable, modern capitalism burst onto the scene. In the wake of this “real” transformation, the intangible moral, legal, and political superstructures had to change in order to maintain the rule of the capitalists, the new oppressors of the proletariat. Mises, of course, believes just the opposite, namely, that the Industrial Revolution could not occur until political and legal reforms gave the people of Western Europe a degree of autonomy from their rulers.
  2. When Mises writes (p. 192) that one must guard against the incorporation of the idea of progress in biological evolution, he is limiting himself to the scope of what the natural sciences can teach us. The accepted modern statement of Darwinian theory holds that it is a naïve confusion to view evolution as a billion-year process in which homo sapiens are eventually reached. Without positing an actor (such as God) who designed the process, there is no goal and hence the term “progress” is inapplicable. In the present day, bacteria can certainly thrive in many areas of the planet, and so (from a purely biological viewpoint) there is no sense in which humans are more “evolved” than the bacteria are.

Study Questions

  1. HUMAN REASON
    • What is the relation between thinking and action?
    • Why is it always the individual who thinks?
    • What is language? Why is it important?
    • What stimulates intellectual progress?
  2. WORLDVIEW AND IDEOLOGY
    • What are the differences between worldview and ideology?
    • Why is it fallacious to believe that one group can only prosper at the expense of other groups?
    • What is the definition of a party?

    Comment: “The main objective of praxeology and economics is to substitute consistent correct ideologies for the contradictory tenets of popular eclecticism.”

    • What is a monetary crank?
    • How can we fight error?
  3. MIGHT
    • What is might?
    • To what does someone owe his might?
    • What is the difference between a government that uses violent oppression and a gangster who overpowers a weaker person?
    • Can minority rule endure?
  4. MELIORISM AND THE IDEA OF PROGRESS
    • What are the definitions of progress and retrogression?
    • Men err very often. How is this compatible with democracy?

    Comment: “There is but one yardstick for the appraisal of human action: whether or not it is fit to attain the ends aimed at by acting men.”

CHAPTER X

EXCHANGE WITHIN SOCIETY

Chapter Summary

1. AUTISTIC EXCHANGE AND INTERPERSONAL EXCHANGE

All action is an exchange, of giving up what is less satisfactory for (the actor hopes) what is more satisfactory. Autistic exchange concerns only one actor, while interpersonal exchange involves cooperation between two or more individuals. Although the emergence of social cooperation occurred gradually in the course of history, the conceptual line between autistic versus interpersonal exchange is sharp.

2. CONTRACTUAL BONDS AND HEGEMONIC BONDS

People can cooperate either in a contractual or in a hegemonic relationship. In the former, the participants are on an equal footing. In the latter, one person or group is in charge over the subordinates. Even in a hegemonic structure, the subordinate still acts. He simply chooses subjection over the alternative.

The achievements of modern civilization are the result of contractual bonds. The modern state is a hegemonic structure, though some nations enjoy the “rule of law” (i.e., strict and known limits to the sovereign’s power) to a greater extent than others. Contractual societies can live in peace, while hegemonic ones cannot coexist because each hegemon will desire to incorporate autonomous neighbors under his rule.

3. CALCULATIVE ACTION

All action uses ordinal numbers, in the sense that possible outcomes must be ranked on the scale of values to determine which action will result in the highest possible satisfaction. The use of cardinal numbers in action requires special conditions. It was in the context of a contractual society that the use of arithmetic as an aid to action developed.

The distinction between calculable and noncalculable action is of the utmost importance. Modern civilization is possible only because people have learned how to apply arithmetic to so many different fields. Economics itself may be described as a theory of that scope of human action that relies on calculation.

Why It Matters

This short chapter provides the link between Part II (“Action Within the Framework of Society”) and Part III (“Economic Calculation”) of the book. As the book progresses, its scope narrows. Part I focused on human action and thus exchange per se, while Part II dealt with interpersonal exchange. Part III refines the study to interpersonal exchange when calculation is possible, and thus marks the beginning of economics proper in Human Action.

Technical Notes

  1. Mises’s discussion of hegemonic relations (pp. 196–99) is quite nuanced, and the modern Austrolibertarian reader should take care in reading this section. Mises does not seem to be merely distinguishing aggression from nonaggression. For example, he classifies the family as a hegemonic institution. He also says that

    in a hegemonic body a man neither gives nor receives anything that is definite. He integrates himself into a system in which he has to render indefinite services and will receive what the director is willing to assign to him. ...He is at the mercy of the director. The director alone is free to choose.

    One can certainly imagine socialists using these words as a description of (at least some) types of “wage slavery,” in which the workers only choose at the outset to work for a particular employer, but after that are completely subject to the commands of the boss. The immediate retort, namely, that the worker under capitalism can always quit, is also true in a hegemonic relation: at any moment the subordinate may choose to renounce his subjection and openly defy the hegemon.

  2. When Mises discusses calculation (p. 200), he continually uses the word arithmetic rather than mathematics. These terms are not interchangeable, and Mises is properly choosing arithmetic. When he writes that no other distinction is more important than that between calculable and noncalculable action, he doesn’t have in mind (say) that engineers couldn’t build bridges without knowledge of geometry. No, Mises is making the much more fundamental point that what we know of as “economy” would be impossible if shepherds couldn’t number their flocks or merchants couldn’t compare different potential trades to see which offered the best price.

Study Questions

  1. AUTISTIC EXCHANGE AND INTERPERSONAL EXCHANGE
    • What is the difference between an autistic and an interpersonal exchange?
    • Is exchange a win-win situation?
  2. CONTRACTUAL BONDS AND HEGEMONIC BONDS
    • Why does a contract imply mutuality?
    • Does a state imply hegemonic organization?
    • In what way did contractual relations help to form human civilization?
    • What distinguishes a Rechtsstaat from a Wohlfahrtsstaat?
  3. CALCULATIVE ACTION
    • What is the relationship between action and nonaction?

      Explain: “No other distinction is of greater significance, both for human life and for the study of human action, than that between calculable action and noncalculable action.”

    • Why is economic calculation so fundamental?

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